Owning a home in Ontario can feel like a thrilling step, especially when you’re coming from outside Canada. From the exciting cities in the Greater Toronto Area (GTA) to the more peaceful communities scattered across the province, Ontario real estate has plenty to offer. 

For people who do not hold Canadian citizenship, the process can seem confusing. It involves special rules, taxes, and other factors to keep in mind. The good news is that buying a property in Ontario as a non-Canadian resident is very possible, as long as you understand the important steps. 

Partnering with experts like The Johnson Team, who have a strong reputation in the local real estate market, can be a smart way to make sure you’re on the right path. If you’re ready to move forward or have any questions, please reach out to The Johnson Team right away to start working with an agent.

Understanding the Basics of Buying Property in Ontario

Why Ontario Is Popular for Real Estate

Ontario is one of Canada’s most populous provinces and home to many diverse communities. The Greater Toronto Area, which includes the City of Toronto, Peel Region, York Region, and other municipalities, offers countless opportunities for employment, education, and cultural experiences. This mix of career options, top-rated schools, and friendly neighbourhoods draws people from all over the world.

While Toronto is often in the spotlight, it’s not the only city worth exploring. Places like Mississauga, Brampton, Oakville, and Markham also have bustling housing markets, each with their own charm. Small and mid-sized towns outside the GTA, such as Guelph or Kitchener-Waterloo, can be attractive for those looking for a quieter lifestyle with easy access to bigger cities.

Legal Status and Requirements

To buy a property in Ontario, you do not have to be a Canadian citizen or even live in Canada permanently. However, different rules can apply if you’re a non-resident. One key thing to remember is that the Government of Canada, as well as local governments, may have rules and taxes in place that affect foreign buyers. These rules can vary over time, so it’s important to keep up with the latest policies.

Non-residents may be asked to pay higher down payments, follow specific mortgage rules, or face extra taxes. It’s also worth noting that immigration status can affect how long you can stay in Canada at a time and what type of financing you can receive from Canadian banks or other lenders.

Government Rules and Foreign Buyer Taxes

The Foreign Buyer Ban (Prohibition on the Purchase of Residential Property by Non-Canadians Act)

In January 2023, the Canadian federal government introduced a two-year ban on certain foreign homebuyers purchasing residential properties in specific areas of Canada. This law, called the Prohibition on the Purchase of Residential Property by Non-Canadians Act, was designed to help manage housing prices and demand. However, the policy includes several exceptions. Some foreign nationals, such as international students who meet certain requirements, people with work permits living in Canada, and refugees, may still be allowed to buy homes under specific conditions. It’s crucial to review the current guidelines to see if you are exempt.

Non-Resident Speculation Tax (NRST)

Ontario has a special tax known as the Non-Resident Speculation Tax (NRST). It applies to homes located in certain areas, like the Golden Horseshoe region, which covers the City of Toronto and surrounding municipalities. The NRST can be up to 25% of the purchase price if the buyer is not a citizen or permanent resident of Canada. This tax also applies to some foreign corporations and taxable trustees.

In some cases, you may get a rebate on the NRST. For example, if you become a permanent resident within a set time frame after buying your home, you might be able to request a refund. Always check the most recent rules and talk to a real estate professional or lawyer to see if you qualify for any rebates or exemptions.

Property Taxes and Other Fees

Aside from the NRST, non-Canadian residents still have to pay the standard property taxes that apply to any home in Ontario. These taxes differ based on where the property is located. Municipalities like Toronto, Mississauga, or Markham each set their own property tax rates. You may also have to pay fees like land transfer taxes. In the City of Toronto, a municipal land transfer tax is charged on top of the provincial land transfer tax, effectively doubling that cost for homes in Toronto. Make sure you budget for these extra costs.

Financing Options for Non-Canadian Residents

Working with Canadian Banks and Lenders

Many Canadian banks and private lenders provide mortgage solutions for non-residents. However, the requirements can be more strict than for Canadian citizens. For instance, a higher down payment, often 35% or more, may be required if you don’t have a Canadian credit history. You might also need to show documents such as proof of income, international credit reports, or letters of reference.

What About Mortgage Insurance?

In Canada, if you have a down payment under 20%, you usually need mortgage insurance from providers like Canada Mortgage and Housing Corporation (CMHC). However, non-residents often must put down at least 20%, which eliminates the need for mortgage insurance. Keep in mind, each financial institution has its own guidelines, so it’s important to explore various options.

Building a Strong Credit Profile

If you plan to live in Canada at some point, consider setting up Canadian credit accounts to build a local credit history. A strong credit profile can lead to better mortgage rates. You can start by opening a Canadian bank account, using a credit card responsibly, and paying bills on time. While this isn’t always possible if you live overseas, it can be a valuable step if you have future plans in Canada.

The Buying Process Step by Step

1. Budgeting and Pre-Approval

Before house hunting, set a clear budget that includes your down payment, mortgage amount, and extra costs like land transfer taxes and legal fees. Then, get a mortgage pre-approval. It helps show sellers that you’re a serious buyer and know your price range.

2. Finding a Real Estate Agent

Working with a skilled real estate agent is a big advantage. They can guide you through the local market, show you suitable homes, and negotiate on your behalf. The Johnson Team, for example, has a deep understanding of the GTA market, including important details like new government regulations that might affect your purchase.

3. House Hunting and Making an Offer

When house hunting, consider visiting properties that match your criteria. During open houses or private showings, pay attention to things like the home’s layout, condition, and location. Once you find a home you love, you’ll make a formal offer to purchase. This offer includes the price, closing date, and any conditions (like a home inspection).

4. Home Inspection

A home inspection is a vital step. It uncovers any potential problems, such as faulty wiring or a leaky roof. If the inspection reveals big issues, you can renegotiate the price or walk away from the deal. Always budget for a good home inspection.

5. Closing the Deal

During closing, you’ll have to pay the balance of your down payment and any other fees, like land transfer tax. You’ll also sign the final paperwork with a lawyer or notary. Once everything is done, you get the keys to your new home.

Rental and Investment Considerations

Renting Out Your Property

Some non-Canadian residents buy property in Ontario as an investment. If you choose to rent out your home, be aware of Canadian tax rules. You might need to declare rental income and, in some cases, withhold and remit taxes to the Canada Revenue Agency (CRA). It can be wise to consult a Canadian accountant who specialises in non-resident taxes.

Property Management

If you don’t plan on living in your Ontario home, especially if you’re overseas, you may want to hire a property manager. They can collect rent, handle repairs, and keep you informed about changes in the local real estate market. A trusted local real estate team, like The Johnson Team, can also offer insights about the best property managers.

Common Mistakes to Avoid

Overlooking Local Rules

Sometimes buyers forget about special taxes or regulations. This can be expensive. Make sure you stay updated on policies such as the Non-Resident Speculation Tax, foreign buyer bans, or other fees.

Skipping Legal Advice

Legal experts ensure your contract protects your best interests. For instance, they can help you understand if the property is part of a condo corporation and if there are restrictions on what you can do with the property. Spending time on proper legal advice can save you from headaches later.

Not Considering Resale Value

Even if you plan to keep your property for a long time, life changes happen. Choose a property that fits your current needs and has good resale potential. Factors like school districts, transit, and local amenities impact a home’s attractiveness to future buyers.

Tips for a Smooth Experience

  1. Do Your Research: Study the market, understand your budget, and look at different neighbourhoods.

  2. Plan for Extra Costs: Budget for NRST, land transfer taxes, lawyer fees, and inspections.

  3. Build a Local Support Team: Work with a real estate agent, mortgage broker, and lawyer who understand non-resident issues.

  4. Visit in Person if Possible: If you can, travel to Ontario to see neighbourhoods and homes firsthand.

  5. Keep Documents Safe: Store digital and paper copies of all forms, receipts, and contracts.

Partner with The Johnson Team for a Hassle-Free Journey

Buying a property in Ontario as a non-Canadian resident can be a rewarding adventure. Still, it’s easy to feel overwhelmed by the many rules, taxes, and decisions involved. Having a trusted real estate partner who understands the local market and your unique needs can make a huge difference. 

The Johnson Team is a renowned name in the local real estate market. We are known for our strong reputation, unparalleled market knowledge, and creative marketing strategies. Whether you’re seeking a primary home, an investment property, or looking to sell, The Johnson Team guides you every step of the way. We’ll help you find the perfect neighbourhood, navigate financing options, and manage the negotiation process. If you’re ready to start working with an agent, don't hesitate to contact us immediately.

Posted by Maryann Jones on
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